The Online Safety Act 2023 received royal assent on 26 October, having sparked debate in the pensions industry over the inclusion of financial harm from online ads. Most of the provisions in the Act are expected to come into force in two months. Here is what the new law means. 

 

Consumer organisation Which? found that between April 2020 and March 2021, people lost £535m just on investment scams, of which the majority happened online. Which? says that this is only a very small part of the harm, citing the impact scams have on the wellbeing of victims – it prices this at £7.2bn per year, or £3,684 a year per person.   

 

The new legislation is focussed on issues of child protection and terrorism, with the government having been reluctant to include financial matters at first. However, following intense pressure from a coalition including the City of London police and the Association of British Insurers, as well as the Financial Conduct Authority, several MPs and consumer champion Martin Lewis, the bill was eventually amended to include fraudulent online adverts – where scammers pay search engines and social media firms to host fake or misleading ads. 

 

 

 

Ofcom, the communications regulator, will be given powers to investigate and prosecute offenders. It is due to issue codes and guidance around the new legislation and will consult about these from 9 November. It will then take a phased approach to bringing the Online Safety Act into force, prioritising enforcing rules against the most harmful content as soon as possible, according to the government. 

 

Although Ofcom is in charge, on the financial scams side, the FCA will clearly have a role to play. 

 

An FCA spokesperson said: “We welcome the passage of the Online Safety Bill. The FCA has supported Ofcom in examining how legislative requirements around financial promotions can be incorporated into Ofcom’s draft codes and guidance, including how services can identify illegal financial promotions online.” 

  

The spokesperson added that the FCA and Ofcom will continue to work together “to create a shared understanding” of platforms’ obligations under the Online Safety Act and financial promotions legislation. 

  

Intervention by the FCA means the main search engines and major social media platforms have now changed their policies to permit only FCA-authorised firms to market financial services. The FCA made requests to remove illegal financial promotions to all major social media companies. The high number of illegal financial promotions means the watchdog expects every social media platform to improve its capability to identify and remove such ads proactively. 

  

Financial promotions data from 2022 shows the regulator required firms to amend or remove 8,582 promotions or ads, 14 times more than in the previous year.  

  

 

In 2021, the FCA’s chief executive Nikhil Rathi said that since the UK has left the EU, online platforms were no longer exempt from the regime on financial promotions.  

  

“We see no reason why different standards should apply to a search engine or social media compared to a newspaper. If these platforms choose to display and profit from adverts for risky – and in some cases fraudulent – investments, they should also comply with financial promotions rules,” he said, noting that inexperienced investors are more than twice as likely to resort to social media.  

  

"We’re looking at how social media platforms are adapting to these new rules. If needed, we will take action,” he said at the time, arguing that online search and social media firms need to take greater responsibility for their role in connecting consumers with investment offers. 

Last year, the former Department for Digital, Culture, Media & Sport – which has been replaced by the Department for Science, Innovation and Technology and the Department for Culture, Media and Sport – launched a wider consultation on advertising and subsequently formed a taskforce which had its first meeting in late July.  

 

However, Margaret Snowdon, who chairs the Pension Scams Industry Group, has been an advocate for creating regulatory instruments to crack down on scams, but does not expect that much will happen in terms of ads regulation before Ofcom starts consulting on its powers, codes and guidance. 

  

"Given the focus is on harm to children, I don’t expect financial matters to be top of mind, but the opportunity to take down fake financial adverts and to prosecute platforms who fail to act is there,” she said. 

 

Katie Whitford, a senior associate at law firm Sackers, said the duty on search engines and certain social media platforms will reach into the pensions sector. 

 

"Some of the detail of the duty’s scope will be set out in regulations, but it will include a requirement to operate proportionate systems and processes to prevent individuals encountering fraudulent advertisements,” she said.